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Risks remain for Irish economic recovery: IMF

18 June 2014, 17:43 CET
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(DUBLIN) - Ireland faces significant challenges as it begins a tentative economic recovery, the International Monetary Fund said Wednesday in its first review since Dublin exited an international bailout programme in December.

"Following a smooth exit from the EU-IMF supported programme, strong job creation and other indicators suggest Ireland's economic recovery is broadening," the IMF said in a staff report.

"Nonetheless, important challenges remain, with unemployment still high, credit continuing to contract, and significant public and private balance sheet fragilities."

Ireland was forced to turn to the European Union and the IMF for an 85-billion-euro ($115 billion) rescue in 2010 after a banking crash and the bursting of a property bubble, but regained investor confidence after it cut spending and raised taxes.

Dublin has since made a number of returns to the debt markets at favourable interest rates and Ireland's 10-year bond yield reached an all time low of 2.4 percent this month.

The IMF forecasts the Irish economy to grow 1.7 percent in 2014 and to increase 2.5 percent on average from 2015.

But based on current growth and revenue forecasts, Dublin will still require further austerity to reduce the deficit to 3.0 percent by 2015 under EU rules.

This will require approximately 2.0 billion euros in spending cuts and tax increases in October's budget, according to government estimates.

The IMF report also warned non-performing loans at the Irish banks, which stood at 27 percent at the end of 2013, were hindering lending, and called for a strengthening of employment services and training to address joblessness, which stood at 11.8 percent in May.


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